Market Structure

Analyze the ways in which the government controls monopolies and oligopolies.

-Nationalizing- government seizes ownership -Regulation- government has ability to regulate, set prices -Creative Destruction- making something new that breaks up the monopoly -Countervailing power- suppliers never become a monopoly

Oligopoly

2-4 firms controlling 70-80%, difficult entry, 2-4 substitutes, fairly inelastic goods, price under some control of the firms

Analyze two of the market structures that we have discussed in class. How are the two similar and how are they different?

A monopoly and perfect competition are two types of market structures. A monopoly has the least number of firms and perfect competition has the largest. A monopoly is the hardest to enter and a perfect competition is the easiest. Monopolies have no realistic substitute goods and perfect competition has perfect substitute goods. Goods are most inelastic in a monopoly and goods are most elastic in a perfect competition.

Mergers

Mergers - oligopolies drive to merge to defeat competition

Monopolies oftentimes make it very difficult for other businesses to enter the market. Evaluate this statement and provide support to back it up.

Monopolies have no competition because there are no other businesses to compete with them so they can set prices to an extreme and take advantage of the consumers. Also when other businesses come along they have the ability to set the prices low running the other companies out of business. Support to back it up could include a monopoly that is the only company that sells a type of clothing and they can set the price to what they want because they have no other companies to compete with. -Economy to Scale, Illegal, Patents-difficult for others to get into the market

Price Discrimination

charging different prices to meet equilibrium price of different populations

Prisoner's dilemma

even if oligopoly collude, one member undermines plan by lowering price to gain rapid profits

Product Differentiation

firms modify products to increase sales

Brand Multiplication

firms release separate brands of "similar" product to increase sales

Natural Monopoly

geographic area only supports one firm

Inelastic Goods

goods that you need, not necessarily wanted or desired

Elastic Goods

goods that you want, luxuries/desired

License

government issued rights to enter a market (lawyers, doctors, teachers)

Nationalizing

government seizes ownership

Economies of Sale

high start up cost, followed by low costs of production make difficult to start new firm and compete with established monopoly (dams/power plants)

Collusion

illegal price fixing in the US

Perfect Competition

largest number of firms, easiest to enter, goods are perfect substitutes, goods are most elastic

Monopoly

least number of firms, hardest entry, no realistic substitutes, goods are most inelastic

Monopolistic Competition

many companies selling similar, but not perfect substitute goods (mini monopolies)

Advertising

monopoly/perfect competition least likely to advertise, oligopoly/monopolistic competition most likely

Creative Destruction

new innovation encouraged to compete with monopoly

Patent

new technology protected

Laissez Faire

no government interference

Cartel

oligopoly organization that fixes prices (OPEC)

Price Takers

price determined completely by supply/demand equilibrium

Price Maker

price set by monopoly is maximum people will spend

Franchise

right to exclusive selling in market (stadiums, schools)